Rates on one-year adjustable-rate mortgages fell to an average of 3.40 percent from 3.48 percent.

"You're going to get some people enticed to buy new homes," said Scott Brown, chief economist at Raymond James & Associates in St. Petersburg, Fla. "But people are still a bit shellshocked by the downturn in prices, and they're going to be a lot more careful than they were before."

Rates have mostly fallen since spring as investors shifted money into the safety of Treasury bonds, lowering their yields. Mortgage rates tend to track those yields.

The 30-year rate was 5.08 percent at the beginning of April, and the 15-year rate was 4.39 percent.

In recent weeks, Treasury yields have dropped because investors expect the Federal Reserve to increase its Treasury purchases soon to boost the economy. That has pushed down rates.

On Wednesday, the closely watched 10-year yield reached its lowest point of the year, at 2.39 percent, following a surprisingly weak employment report.

The Mortgage Bankers Association's index of mortgage applications declined for the fifth straight week in the period that ended Oct. 1, the Washington-based group said Wednesday.